My son turned 18. Here’s how his bank account grew up
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My son turned 18 this spring and is now getting ready to head off to college. But as he reaches the age of majority and matriculates to university, the terms and conditions of his savings account are coming of age, too, in the form of fees. My husband and I were notified of these changes in a letter from the bank, which explained that his “youth customer” benefits would soon expire, and he’d be transitioning to the “young adult customer” group, where fees apply.
Here’s what happened with my son’s savings account, what he did as well as some tips for young adults to ensure their bank account meets their financial needs.
Turning 18 can trigger new bank fees
The bank’s letter informed my son that when he turned 18, his account would start to incur a $6.95 monthly service fee if he didn’t meet a $300 minimum balance requirement. Prior to that, such monthly fees were waived because of his age. Understanding such changes was important in helping my son decide whether it was time to find a new account, or even a new bank.
“When you turn 18, if your parents previously co-owned the account with you, it might transition to your sole ownership,” says Mary Hines Droesch, head of consumer and small business products at Bank of America. “This increased responsibility means that you’ll be able to use features such as transferring funds, increased spending limits and more options that were once regulated by your parent or guardian.”
The rules can differ among financial institutions, so it’s important to check the account details before your child’s 18th birthday, Hines Droesch says.
How your bank account changes when you reach adulthood
How a person’s bank account changes as they age — and whether it changes at all — depends on the bank and the type of accounts that are held.
“Many banks offer special accounts for minors, typically with parental oversight or limitations,” says Carlos Rodriguez, director, financial planning at Edelman Financial Engines. “Upon turning 18, individuals may transition to standard adult accounts, which might come with different fee structures, interest rates and features.”
Standard accounts vs. children’s accounts
In my son’s case, he’s listed as an owner of a standard savings account. For such accounts, his bank chooses to waive monthly fees until the child reaches the age of 18.
Similarly, bank accounts that are designed specifically for children or teens often don’t charge monthly maintenance fees. However, when your child reaches a designated age, the rules may also change.
For example, Chase Bank offers a High School Checking account to students who are ages 13 to 17 years old at account opening. The account charges no monthly service fees. Once the student turns 19, however, the account automatically converts to a Chase Total Checking account — and is subject to that account’s terms — unless the account holder chooses to convert it to a different account, such as the bank’s College Checking account.
Ways young adults can reevaluate their banking relationship
After graduating high school, many young adults make plans to start college or trade school. Many also take on more financial responsibilities, such as paying for college, rent and other living expenses. This makes it a good time to build an emergency fund, start a budget and find a savings account that earns a competitive yield.
Important features a young person should consider in a bank account include:
- Annual percentage yield (APY): If you already have a savings account that’s earning a low APY, now’s a good time to consider one that’s earning a competitive rate. Often, these are offered from online-only banks.
- Lack of fees: It pays to find an account in which you won’t have maintenance fees eating away at your balance. Choose an account that doesn’t charge such fees (or makes them easy for you to avoid).
- Convenience: Find a bank that fits in well with your lifestyle. If you’re going away to college and will be using ATMs frequently, make sure your bank provides fee-free access to ATMs where you’ll be living. Also, a robust banking app comes in handy for mobile check deposit, sending money to friends and family and checking your account balance.
Consider a college bank account
Some banks offer accounts geared toward college students. For instance, Navy Federal Credit Union offers a Free Campus account, which provides up to $10 in ATM fee reimbursements each statement cycle. Bank of America’s SafeBalance provides student-friendly perks such as monthly maintenance fees that are waived for account owners under the age of 25.
“Using a bank account specifically tailored to college students can empower young adults to build responsible financial habits amidst their newfound freedom,” Bank of America’s Hines Droesch says. “These accounts usually come with many benefits and safety nets such as overdraft protection, waiving maintenance fees, and no minimum balance requirement.”
Young adults shopping around for the right bank may find a college bank account to be the best option. It might also pay to include standard bank accounts in your search, because many of these offer similar perks such as no minimum balance requirements or monthly service fees.
Bottom line
My son will hold on to his bank account, for now. This is thanks, in part, to the monthly fee being relatively easy to avoid. The bank also offers access to plenty of ATMs (and branches, should he need them) within walking distance of his future dorm. What’s more, the user-friendly mobile app makes it easy to perform transactions with just a couple of clicks.
Whether your bank account’s terms and conditions change over time, the best account for you remains one that won’t bog you down with fees and that meets your financial needs well.